Congress' Big Stick Just Got a Little Shorter

Susan Clark (left) argues with another protester about the Affordable Care Act outside the U.S. Supreme Court. Chief Justice John Roberts likened the law's Medicaid expansion provision to "a gun to the head" of states.

Kris ConnorGetty Images

Originally published on April 4, 2013 1:58 pm

Nothing breeds lawsuits like uncertainty. That being the case, the Supreme Court's landmark health care ruling is almost certain to open the door to lawsuits challenging the federal government's authority.

The court ruled the federal government can't force states to participate in a major expansion of Medicaid or else risk losing existing Medicaid funds from Washington. That threat amounted to unconstitutional coercion.

"In this case, the financial 'inducement' Congress has chosen is much more than 'relatively mild encouragement' — it is a gun to the head," Chief Justice John Roberts wrote in his majority opinion.

Congress and federal agencies frequently put strings on the money they give to states. But the high court's health ruling didn't draw a clear line between the types of financial conditions that are OK and those that are unfair to states.

"The way Roberts wrote the opinion, it's a deliberate invitation to litigation," says Brian Galle, a law professor at Boston College.

Testing The Limits

It's possible that this ruling will have broad implications, because Congress uses the threat of financial penalties to get states to do all kinds of things, such as meeting clean air requirements and making elementary school children take annual standardized tests.

It's also possible that it won't mean much, because Medicaid is such an exceptionally large program. "This could be a sui generis situation," says Tim Conlan, a public policy professor at George Mason University. "No other federal-state program comes close to the size of Medicaid."

But Conlan says there appear to be a majority of justices willing to ask larger questions about the limits on congressional spending power than has been the case for decades.

"This could become a very significant ruling if they're willing to be aggressive about elaborating on this," he says.

The justices probably will get a chance to do so. States are likely to be emboldened to challenge other federal strictures. If courts find financial penalties that are much smaller than Medicaid to be unconstitutionally harmful to states, this could lead to a massive shift in relations between the states and the federal government — Congress would become much more limited in its ability to impose national standards over a vast amount of domestic policy.

New Ammunition For States

A spokeswoman for the National Association of Attorneys General says the group's members are still sorting out what the health care ruling means for other federal-state programs. The offices of individual state attorneys general, including some who challenged the health care law, similarly say they haven't yet thought through all the implications.

State attorneys general and governors often challenge new rules out of Washington. Typically, they don't win. "I don't know that states have won anything since the New Deal," says Ray Scheppach, a former executive director of the National Governors Association.

But the Medicaid ruling gives them new impetus to try.

"States are not going to stand passively by and allow the federal government to pass detrimental legislation," says Susan Frederick, federal affairs counsel for the National Conference of State Legislatures. She added: "What we can take away from the Affordable Care Act litigation is that states are no longer afraid to challenge federal legislation."

Conlan agrees. "If there's ever been an open invitation for attorneys general to pursue cases, this was it," he notes. "The court did not do what it did in Bush v. Gore, which was to say there will never be another case with these characteristics, which they could have done easily."

Congress has been imposing requirements on states in exchange for money for at least a century, Conlan says. During the 19th century, Congress handed out land grant and college funds without any real provisos. Since then, however, Congress has used its spending authority to force states to change the way they do business in lots of areas, from highway administration to welfare policy.

"In a sense, Congress learned its lessons about just providing the funds and leaving it up to states' good judgment," Conlan says.

No Clear Guidance

But the Medicare decision upends that dynamic. If governors in states such as Louisiana, Florida and Texas make good on recent announcements that they won't participate in the Medicaid expansion, the federal government lacks leverage to do much about it.

"It is true that this is the first time that the court has invalidated an expansion based upon restraint on federal power," says James Blumstein, a law professor at Vanderbilt University who wrote an amicus brief in the Medicaid case that anticipated Roberts' ruling.

"But they've always said for years, decades, that this [limit] existed," Blumstein says. "If this [Medicaid rule] had not crossed the line, the line wouldn't have existed."

So where exactly is the line now? No one is certain.

In his health care opinion, Roberts cited a 1987 decision, South Dakota v. Dole, in which the court found that it wasn't "impermissively coercive," as the chief justice put it, to require states to raise the minimum drinking age to 21 or lose 5 percent of their federal highway funds.

The sum at stake amounted to less than one-half of 1 percent of South Dakota's budget at the time — a lot less than the share of federal Medicaid money that makes up every state's budget, which is about 15 percent, according to the National Association of State Budget Officers.

But because there's such a big gap between the amount of money the court has said is permissible and the amount it has ruled is unconstitutional, no one has a clear sense of how much leverage Congress can wield over the states.

"We've had very little guidance about the point at which a condition becomes coercive," says Richard Garnett, associate dean of Notre Dame Law School. "I'm not sure we really have any more guidance now."

Redefining The Lines

It's possible that the Medicaid ruling will remain an outlier. Medicaid is far and away the largest federal-state program, and it was an unusual move for Congress to put the entirety of existing Medicaid dollars at risk, as opposed to a small percentage of program funding.

Supreme Court decisions in the 1970s and 1980s suggested that justices were open to exploring limits on what Washington could force states to do, based on congressional spending power, but nothing much came of those cases. And the court said as far back as the 1930s that it didn't want to wade into the murky waters of defining what might constitute coercion because that would result in "endless difficulties."

On the other hand, nothing in the court's opinion suggested that it views Medicaid as unique because of its size.

Other federal rules also put lots of money at risk. The government places numerous strings on education dollars, for instance. Those may not make up a huge percentage of any state's spending, but federal grant money dominates the budgets of some school districts, which might be encouraged to sue when presented with strictures they don't like.

The Civil Rights Act, meanwhile, threatens to cut off all federal dollars from any entity that discriminates on the basis of race or gender.

It's also unclear whether the court's decision opens the door for states and localities to challenge existing rules, or only new ones.

"The Supreme Court knows that this decision is going to result in some federal rules being ruled unconstitutional by some judges and maybe even upheld by some circuit courts," says Galle, the Boston College law professor. "They know that."